UK ecommerce group THG faces shareholder rebellion

UK ecommerce group THG is on course for a shareholder rebellion at its annual meeting this month over the reappointment of a longstanding non-executive director. 

Two shareholder advisory groups have urged investors to vote against the re-election of Iain McDonald to the board of the company, which sells nutrition and beauty products online through websites including Lookfantastic and Myprotein.

Both Institutional Shareholder Services and Glass Lewis raised concerns about McDonald’s independence.

McDonald joined the board of THG, formerly known as The Hut Group, in 2010 and currently sits on the remuneration, nomination and sustainability committees. He is also the founder and chief investment officer of investment advisory firm Belerion Capital, which last year worked with asset manager King Street Capital on an unsuccessful bid for THG.

The recommendation ahead of THG’s annual meeting on June 21 comes after a turbulent period for the group and its chief executive, Matthew Moulding, including several profit warnings and concerns about corporate governance.

Moulding co-founded the business in 2004. It listed with a valuation of £5.4bn in 2020 but now has a market capitalisation of £800mn. He has been highly critical of the London stock exchange and described the company’s decision to list as a “mistake”.

ISS said that although it was pragmatic about cases where a non-executive director’s tenure has reached or exceeded nine years, McDonald was “not considered to be independent” because he has been on the board together with founders Moulding and John Gallemore for 13 years. 

Glass Lewis also said he was an “affiliate or insider” on the pay committee. ISS added in its report: “Shortcomings include the fact that the remuneration committee is not fully independent.”

In the company’s most recent annual report, the board defended McDonald’s position on the remuneration committee. It said that it “recognises the need for independent membership” of the pay committee but added “it would not be in the best interests of the company and its shareholders for Iain McDonald to step down”.

His “experience and extensive financial expertise and investment acumen make him well equipped to serve on the remuneration committee”, the report added.

McDonald has previously recused himself from board discussions about takeover proposals because of a “conflict of interest”, according to ISS. When THG rejected the £2bn from Belerion in May last year, it confirmed there had been three takeover approaches for the company.

Glass Lewis also urged shareholders to reject THG’s pay report because of an “unjustified” increase in the salary of the company’s new chief financial officer. Damian Sanders will earn £500,000 a year — 11 per cent more than his predecessor, Gallemore.

THG said: “Charles Allen joined the board as independent non-executive chair in March 2022 with a clear mandate to improve governance, transparency and to strengthen and refresh the board by improving its independence and diversity.

“Since then, the board has appointed three new independent [non-executive directors] in Gillian Kent, Dean Moore and Sue Farr, as senior independent non-executive, and with a commitment for further appointments in line with good corporate governance and as a matter of priority during 2023.”